Nvidia (NVDA) has been one of the undisputed winners of the AI boom, with its stock surging over the past two years on the back of soaring demand for its industry-leading GPU chips. The company’s data center business has posted record-breaking revenues quarter after quarter, driven by a wave of enterprise and cloud provider investment in generative AI infrastructure. However, as we look ahead to the rest of 2025, a growing number of risks are starting to cloud Nvidia’s long-term outlook — and analysts are beginning to run downside scenarios that would have been unthinkable just months ago.

In a recent research note, Piper Sandler issued a stark warning to investors, detailing a worst-case scenario where Nvidia’s valuation could tumble to around $77 per share. Adding fuel to the fire, U.S. lawmakers have reportedly intensified scrutiny on Nvidia, highlighting growing concerns about widespread smuggling of its high-end AI chips into China.

In this article, we’ll unpack Piper Sandler’s worst-case scenario and explore the growing regulatory challenges Nvidia faces. With that, let’s dive in!

About Nvidia Stock

With a market cap of $2.86 trillion, Nvidia (NVDA) is a premier technology firm known for its expertise in graphics processing units and artificial intelligence solutions. The company is renowned for its pioneering contributions to gaming, data centers, and AI-driven applications. NVDA’s technological solutions are developed around a platform strategy that combines hardware, systems, software, algorithms, and services to provide distinctive value. 

Shares of the AI darling have dropped 12.5% on a year-to-date basis. NVDA stock initially came under pressure due to concerns sparked by the emergence of DeepSeek. Later, the escalating U.S.-China trade tensions put further pressure on the chipmaker’s stock. 

Piper Sandler Warns NVDA Stock Could Drop Below $77

On May 5, Piper Sandler analyst Harsh Kumar reiterated the firm’s “Overweight” rating and $150 price target on NVDA stock. However, Kumar delivered a stark warning for investors to consider. The analyst pointed out that up to 6.45% of Nvidia’s crucial data center revenue could be at risk if corporate capital expenditures slow down.

In a note, Piper Sandler’s analyst outlined a worst-case scenario based on potential downside from capital expenditure cuts and ongoing headwinds from China. According to Kumar’s estimates, about 6.45% of Nvidia’s annual data center revenue — approximately $9.8 billion — could be impacted if capital expenditure budgets tighten and the China business does not return. The revenue impact would translate to an estimated $0.40 reduction in earnings per share. As a result, that would bring Nvidia’s valuation down to around $76.25 per share, based on a conservative earnings multiple of 25x.

Meanwhile, the analyst said their published model already excludes China revenues, following Nvidia’s 8-K filing on April 15, ensuring the potential revenue impact in their scenario doesn’t double-count exposure to China. In mid-April, Nvidia announced it expects to incur a $5.5 billion charge in its upcoming earnings report after the U.S. government required the chipmaker to obtain a special license to export its H20 accelerators, which were specifically designed for the Chinese market.

Kumar emphasized that data center sales are the backbone of Nvidia’s cloud-AI push and have driven much of its recent growth. However, this segment is particularly vulnerable to enterprise budget constraints and regulatory shifts. Kumar pointed out that even a single-digit percentage decline in this high-margin segment could cause significant volatility in Nvidia’s overall revenue and profit projections.

Indeed, Nvidia’s recent blockbuster quarters were fueled by record-breaking data center revenues, so investors should closely watch AI capex trends, as they carry major implications for Nvidia’s growth story. Notably, recent Big Tech earnings offered reassurance on that front, indicating sustained momentum in AI investments.

U.S. Lawmaker Introduces Bill to Curb Nvidia AI Chip Smuggling to China

Also on May 5, Reuters reported that U.S. Representative Bill Foster plans to introduce legislation in the coming weeks aimed at verifying the location of AI chips — like those produced by Nvidia — after they are sold. The initiative to track the chips is intended to address reports of widespread smuggling of Nvidia’s chips into China, violating U.S. export control rules. Nvidia has stated that it is unable to track its products once they have been sold.

Foster, a Democrat from Illinois, stated that the technology to track chips post-sale already exists, with much of it already embedded in Nvidia’s chips, the report noted. The bill would mandate U.S. regulators to enforce two key rules: track chips to verify they remain in authorized locations and disable their functionality if they lack the proper export license. Foster stressed that this is not merely a future concern — it’s an issue already unfolding. The urgency surrounding this issue grew after the emergence of China’s DeepSeek, he said, which was reportedly developed using Nvidia chips that were banned from sale to China.

Foster’s proposed legislation has garnered rare bipartisan support. Representative Raja Krishnamoorthi, a Democrat from Illinois and a key member of the House Select Committee on China, voiced his support for the proposal. “On-chip location verification is one creative solution we should explore to stop this smuggling,” Krishnamoorthi said in a statement. Republican Representative John Moolenaar, who chairs the Select Committee, has also expressed support for the initiative.

Nvidia declined to comment on the proposed legislation. Notably, the company’s revenue from China stood at $17 billion in the last fiscal year, accounting for 13% of total sales. Until recently, the chipmaker was allowed to sell a less-powerful version of its AI chip in China.

With that, this new legislation could redefine how high-end AI chips are sold and tracked, ensuring these critical AI assets are used in ways that uphold national security and technological integrity.

All Eyes on Nvidia’s Q1 Results

Nvidia is set to report its fiscal Q1 financial results on May 28. The company has previously guided for Q1 revenue to be around $43 billion, plus or minus 2%, representing a 65% increase year-over-year and a 9% increase quarter-over-quarter. At the same time, as previously mentioned, Nvidia stated it will record approximately $5.5 billion in Q1 writedowns related to inventory and commitments for the H20 chip.

Analysts expect that Nvidia will report adjusted EPS of $0.89 in Q1, reflecting a 45.28% year-over-year increase. The chipmaker’s revenue is projected to grow 65.45% year-over-year to $43.09 billion. This growth is projected to be driven by continued strong demand for the company’s GPU chips used in generative AI applications. In the fourth quarter, Nvidia announced a substantial ramp-up in large-scale production of its latest Blackwell AI chips. With that, these new chips are expected to bolster Q1 revenue growth while also contributing to margin improvement.

Still, all eyes will be on Nvidia’s forward guidance, particularly amid uncertainty surrounding U.S. trade policies and tariffs impacting major trading partners. Investors found some relief on Wednesday following a Bloomberg News report that President Donald Trump intends to roll back former President Joe Biden-era AI chip restrictions as part of a broader overhaul of semiconductor trade policies. The repeal, still pending finalization, would end the so-called “AI Diffusion” rule implemented in the final days of the Biden administration. The AI Diffusion rule categorizes countries into three tiers based on their relationship with the U.S. and restricts the quantity of chips that can be exported to each tier. The Trump administration will not enforce the rule once it takes effect on May 15, according to the report.

What Do Analysts Expect for NVDA Stock?

Most Wall Street analysts remain bullish about NVDA’s growth potential, with the stock holding a consensus “Strong Buy” rating. At the same time, investors were dealt a blow in late April when Seaport Research Partners initiated coverage of NVDA stock with a rare “Sell” rating and $100 price target. The firm said the company’s “prospects are well understood and largely priced into the stock.”

Overall, among the 44 analysts covering the stock, 37 rate it a “Strong Buy,” two recommend a “Moderate Buy,” four advise holding, and one assigns a “Strong Sell” rating. The mean price target for NVDA stock stands at $166.10, indicating a potential upside of 43% from current levels.